U.S. fund manager Peter Tchir sent a note to his clients entitled: “Did Someone Hit the Sell Everything Button?” His biggest concern (and everyone’s) is the sudden change in behavior – panic selling. Younger money managers likely haven’t experienced the ‘no bid’ scenario.  This occurs when the herd wants only to sell, not to buy…hence trade is all one-sided, or rather there is not trade.
sell button pic
Consider my past rant about the lack of liquidity of the hottest sectors of late (private equity, infrastructure investments) – and the impact of these trends in the event institutional and retail investors need to raise cash.  They’ll sell what they ‘can’ sell; publicly listed securities.  The sad truth is it’s become so expensive and bothersome to be a public company, the sheer number of publicly listed companies has been shrinking.
Public Listed Companies in the US

This panic then is nirvana for short-sellers (an activity that should be illegal) as the number of asks far outnumbers the bids. Relief will come when everyone’s sold what they can and the shorts have to cover.  Could be a wait.

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About the Author

Malvin Spooner is a veteran money manager, former CEO of award-winning investment fund management boutique he founded. He authored A Maverick Investor's Guidebook which blends his experience touring across the heartland in the United States with valuable investing tips and stories. He has been quoted and published for many years in business journals, newspapers and has been featured on many television programs over his career. An avid motorcycle enthusiast, and known across Canada as a part-time musician performing rock ‘n’ roll for charity, Mal is known for his candour and non-traditional (‘maverick’) thinking when discussing financial markets. His previous book published by Insomniac Press — Resources Rock: How to Invest in the Next Global Boom in Natural Resources which he authored with Pamela Clark — predicted the resources boom back in early 2004.

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